“If it’s not our fastest growing site, it’s very close to our fastest growing site, and frankly it’s simply because the talent’s so good,” Schmidt said, adding that people “like to live in Washington, they want to live in Washington.”

Google had 3,021 employees at the end of 2004. Other engineering outposts include New York; Tokyo; Santa Monica, Calif.; Zurich, Switzerland; and Hyderabad and Bangalore, India.

The Kirkland office started with 10 employees in November, but Schmidt said such centers should grow to 50 to 200 employees apiece, “where you have enough that you can have your own chef, very important, your own set of massage rooms, all of the other lifestyle activities that are involved in producing code.”

Engineer poaching and Schmidt’s past tussles with Microsoft weren’t addressed in the speech, which was moderated by Ed Lazowska, who holds the Bill and Melinda Gates Chair in Computer Science at the University of Washington.

Earlier in his career, Schmidt led development of Sun Microsystem’s Java software platform. Microsoft broke antitrust law trying to scuttle Java’s success.

Later, Schmidt ran Novell, a Utah-based company that suffered from Microsoft’s business practices in the 1990s. In November, Microsoft paid $536 million to settle one of two Novell antitrust claims.

But the competition Schmidt and Lazowska mostly discussed yesterday is around the global supply of engineering talent. Schmidt echoed the alliance’s concerns about U.S. investment in the industry’s future, saying the government “is doing stupid things” like cutting basic science research funding.

Schmidt said Google can’t find as many qualified employees as it needs, although he acknowledged the company is picky and has a rigorous screening process.

“We actually underspend our budgets because we cannot hire the quality of people that we need pretty much anywhere,” he said.

Schmidt said Google’s biggest direct competitor is now Yahoo!, but he downplayed the notion of a single victor emerging. He said there will be at least a handful of companies in the field — just as there are still a number of media conglomerates — because Google, Yahoo!, Microsoft and others all have different strengths.

Inside Google, employees move to different projects about every six months and they spend about 20 percent of their time pursuing projects of their choosing.

Schmidt said companies often cut projects that seem peripheral, but Schmidt encourages experiments that may eventually contribute to the core business. One example that’s close to launching is Gmail, a free email service now in testing.

Schmidt suggested a similarly broad, exploratory approach to economic development. Rural communities are more likely to spawn homegrown businesses than recruit outside companies, and intelligence and entrepreneurship are not limited to tech hubs, he said.

“It’s literally everywhere,” he said, suggesting that companies look for smart people in their own town.

“If you walk by a soda shop and you see somebody reading a physics book, that’s the next entrepreneur, that’s the next person who is going to generate a thousand jobs in the community,” he said, “so say hello to him.”

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com; on Twitter: @BrierDudley. Brier Dudley joined the editorial board after 14 years covering Microsoft and the technology industry, including nine years writing a technology column on the business page. A third-generation Seattleite, he received a bachelor’s degree in English from Whitman College and studied film production in Italy before starting a career in newspapers. He has won numerous journalism awards and several oyster-eating competitions.